Survey busts myth; finds millennials are biggest savers

27Contrary to the popular perception that millennials and first jobbers blow up most of their earnings on food, drinks and partying, a survey conducted by BankBazaar, an online marketplace for financial products, finds that they start saving at as early an age as 25, and they save a whopping 40 per cent of their monthly salaries.

The top three reasons for them to save are: enhancing their standard of living with a better house/car, building a nest egg to generate interest income post retirement, and meeting unexpected expenses.

Insufficient savings

The BankBazaar Savings Quotient also finds that the average Indian plans to retire at the age of 56, with retirement planning starting at 29. Despite the early start, the size of the savings corpus envisaged by more than 80 per cent of the respondents is between ₹50 lakh and ₹2 crore. This is grossly insufficient to tide over at least 20-25 years of lifespan post-retirement.

“The good news is that young Indian working professionals start saving very early, at 25, and are the biggest savers. Unfortunately, they are ignorant about how inflation erodes the value of money over time. For instance, a saving corpus of ₹2 crore at the time they turn 56 will be equivalent to only ₹62 lakh of today,” says Aparna Mahesh, Chief Marketing Officer, BankBazaar.com.

Piyush Jain, Managing Partner, Ladco Crest Wealth Management Services LLP, agrees. “Indians may be saving 40 per cent of their salaries, but instead of investing it wisely, they opt for savings bank accounts, fixed deposits, LIC (policies) and ULIPs, which are sold as tax-saving instruments by agents who do not keep their investment goals in mind.

“A 30-year-old who incurs a monthly expense of ₹50,000, amounting to ₹6 lakh per annum today, would need a retirement corpus of at least ₹5 crore with an annuity rate of 6 per cent if he wants to maintain the same lifestyle after retiring at 56 years,” says Jain.

BankBazaar surveyed 1,828 working professionals earning over ₹30,000 a month, between the ages of 22 and 45, from across 12 cities including tier-2 ones such as Lucknow, Bhubaneswar, Jaipur, Pune and Indore.

Spending, too

Of those surveyed, 87 per cent shopped online, 86 per cent ate out and 85 per cent went for a movie in the last one month.

Correspondingly, the top expenses apart from children’s education (45 per cent) — such as travel (25 per cent), leisure (24 per cent), health (23 per cent) and apparel (20 per cent) — relate to these trends directly or indirectly.